Thailand has increasingly become a destination for foreign investors to establish a business or expand their company resulting from its fast-growing economy and positive business environment. In this guide, we list the five reasons for setting up a business in Thailand.
Let’s start.
1. Gateway to Asia
The first reason investors should consider setting up a business in Thailand is that Thailand has a strategic location and is a gateway to various countries in Asia.
Thailand is located between China and India and has close trade relations with the two countries and is also a member of the Association of Southeast Asian Nations (ASEAN), which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore and Vietnam.
Thailand also signed the ASEAN Free Trade Area (AFTA) agreement with the remaining nine countries to support local trade and manufacture within the ASEAN members and encourage economic integration between international and regional partners.
Thailand also has access to the Greater Mekong sub-region, which comprises Cambodia, China, Laos, Myanmar, Thailand and Vietnam. The Greater Mekong sub-region aims to enhance economic relations between the six countries and supports agriculture, energy, transport and trade facilitation, urban development, and tourism.
Investors who set up a business in Thailand will have great potential to access markets around Asia and free trade between countries that have entered a free trade agreement with Thailand.
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2. Incentives for foreign investment
The Thailand Board of Investment (BOI) is a Thai government agency that promotes business start-ups and projects in areas that are desirable for the economic outlook of Thailand.
Companies can apply for BOI promotion to achieve 100% foreign ownership of the company and receive tax incentives for eligible activities.
The BOI tax incentives for the following business activities:
- Agriculture and agricultural products
- Chemicals, paper and plastics
- Electronic industry and electrical appliances
- Light industry
- Mining, ceramics and basic metals
- Metal products, machinery and transportation equipment
- Services and public utilities
- Technology development and innovation
The BOI incentives are classified into two groups, which are group A and group B.
Group A consists of activities that are eligible for corporate income tax incentives, machinery and raw import duty incentives and other non-tax incentives.
| Group | Incentive |
| A1 | Eight-year corporate income tax exemption without cap |
| Exemption of import duty on machinery | |
| Exemption of import duty on raw or essential materials used in manufacturing export products for one year, which can be extended as deemed appropriate by the BOI | |
| Other non-tax incentives | |
| A2 | Eight-year corporate income tax exemption |
| Exemption of import duty on machinery | |
| Exemption of import duty on raw or essential materials used in manufacturing export products for one year, which can be extended as deemed appropriate by the BOI | |
| Other non-tax incentives | |
| A3 | Five-year corporate income tax exemption |
| Exemption of import duty on machinery | |
| Exemption of import duty on raw or essential materials used in manufacturing export products for one year, which can be extended as deemed appropriate by the BOI | |
| Other non-tax incentives | |
| A4 | Three-year corporate income tax exemption |
| Exemption of import duty on machinery | |
| Exemption of import duty on raw or essential materials in manufacturing export products for one year, which can be extended as deemed appropriate by the BOI | |
| Other non-tax incentives |
Group B consists of activities that receive only machinery and raw materials import duty incentives and other non-tax incentives.
| Group | Incentive |
| B1 | Exemption of import duty on machinery |
| Exemption of import duty on raw or essential materials in manufacturing export products for one year, which can be extended as deemed appropriate by the BOI | |
| Other non-tax incentives | |
| B2 | Exemption of import duty on raw or essential materials in manufacturing export products for one year, which can be extended as deemed appropriate by the BOI |
| Other non-tax incentives |
Other benefits the BOI provides to investors are tax holidays, transportation, electricity and water cost deductions. A BOI company can also own land for industrial projects and obtain work permits for foreign employees easier than a regular company.
3. Ease of doing business
In 2020, Thailand ranked 21 out of 190 countries in the World Bank Group’s 2020 Ease of Doing Business report. a
The ranking for starting a business is currently at 47th place with a score of 92.4 out of 100 and ranked at 3rd place with a score of 86 for protecting minority investors.
Thailand also ranked 10th place in the Best Countries to Start a Business ranking in the U.S. News and World Report. Under entrepreneurship, Thailand ranked 36th and ranked 17th place for the open for business category.
4. Special economic zones
Special economic zones (SEZ) are regions that support infrastructure development, investment incentives and provides services for foreign workers to stimulate economic development by attracting Small- and Medium-Sized Enterprises (SMEs).
Benefits given to businesses located in the SEZs include one-stop services, reduced taxation and access to foreign labour.
Thailand currently has 10 SEZs comprising of 23 districts and 91 sub-districts which are:
- Tak SEZ – three districts and 14 sub-districts
- Sa Kaeo SEZ – two districts and four sub-districts
- Trat SEZ – one district and three sub-districts
- Mukdahan SEZ – three districts and 11 sub-districts
- Songkla SEZ – one district and four sub-districts
- Nong Khai SEZ – two districts and 13 sub-districts
- Nakhon Phanom SEZ – two districts and 13 sub-districts
- Chiang Rai SEZ – three districts and 21 sub-districts
- Kanchanaburi SEZ – one district and two sub-districts
- Narathiwat SEZ – five districts and five sub-districts
Continue reading here for more information on SEZs in Thailand.
5. Low corporate tax rates
Thailand is one of the countries in Asia that has a low corporate income tax rate. The standard corporate income rate is 20% but may vary depending on the taxpayer type.
The corporate income tax rates in Thailand are as follows:
| Taxpayer | Tax base | Rate |
| Small company (a company with a paid-up capital of less than THB 5 million at the end of each accounting year) | Net profit from THB 300,000 not exceeding THB 3 million | 15% |
| Net profit over THB 3 million | 20% | |
| Companies listed in the Stock Exchange of Thailand (SET) | Net profit | 20% |
| Companies newly listed in the Stock Exchange of Thailand | Net profit | 20% |
| Companies newly listed in the Market for Alternative Investment (MAI) | Net profit | 20% |
| Banks deriving profits from International Banking Facilities (IBF) | Net profit | 10% |
| Foreign company engaging in international transportation | Gross receipts | 3% |
| Foreign companies not carrying on business in Thailand but receiving dividends from Thailand | Gross receipts | 10% |
| Foreign companies not carrying on business in Thailand but receiving other types of income apart from dividends from Thailand | Gross receipts | 15% |
| Foreign companies disposing of profits out of Thailand | Amount disposed | 10% |
| Profitable association and foundation | Gross receipts | 2% or 10% |
Conclusion
Thailand is located at the centre of most ASEAN countries which provides easy access to surrounding countries and trading routes. It is also known that Thailand provides numerous incentives to foreign investors who run their business in Thailand. If you plan to start a business in Thailand, contact Acclime to support you throughout the process.
